State-owned gas transmission and supply companies have searched an increase up to Rs194.01 each unit inside their tariffs, sparking new challenges to the nation’s economic managers as the increase will probably add to the inflationary pressure and induce the central bank to hold the benchmark interest rate at a high degree.
They aim to gather additional revenue of Rs93.69 billion by the end-consumers from today’s fiscal year, which started around July 1.
The evolution came after the International Monetary Fund (IMF) cut its inflation forecast for Pakistan about 11.8percent on Friday from the 13% anticipated May 2019 for its present fiscal year.
The projected increase in gas prices, when approved, may activate a fresh wave of inflation rather than a decline from the Consumer Price Index (CPI) as proposed by the us government.
Earlierthe State Bank of Pakistan (SBP) and high-ranking government officials anticipated a reduction of inflation in the next half (Jan-Jun 20 20 ) of their existing fiscal year and a notable drop from the upcoming fiscal year.
The inflation reading is still thought to have peaked out at 11.4percent in September 2019.
The central bank has estimated inflation at the range of 11-12percent for the present fiscal year 2019-20.
Government officials and independent experts have been emphasizing the expanding inflation and debt as the 2 important challenges for its financial managers.
“The largest direct impact came in adjustment in natural gas tariffs as this alone contributed 0.7 percentage point out the headline inflation throughout the year (FY19),”” that the SBP said in its own Annual Report 2018-19 released in late October.
This is going to be the next gas price revision since the start of the present fiscal year.
Earlier, the federal government raised gas prices by up to 190% with effect from July 1, 2019 under demanding situations of the 6 billion International Monetary Fund (IMF) loan programme.
The tariff was increased as a way to over come the sales shortfall faced by people gas utilities and decrease their reliance on the government, which faced financial constraints and proceeded to accumulate national and foreign debt to satisfy budgetary financing and international payment conditions.
In a bid to contain inflationary pressure from the market, the central bank has increased the benchmark interest rate from 7.5 percentage points at the past couple of years into an eight-year high at 13.25 percent.
Some experts expect a 50-basis-point decline in the interest rate from the monetary policy announcement to be made from the existing month. Nevertheless, the planned increase in gas tariffs may prompt the central bank to rethink its strategy.
SNGPL has searched a tariff increase of Rs194.01 a million British thermal units (mmbtu) with effect from July 1, 2019 to regain Rs71.02 billion by the end-consumers and over come its own revenue shortfall from the present fiscal year, according to an advertisement of this Oil and Gas Regulatory Authority (Ogra).
SSGC has searched a price increase of Rs62.52 each mmbtu with the effect from July 1, 2019 to amass an additional Rs22.67 billion by the end-consumers at FY20.
Ogra — that the regulatory authority has announced that it will hold public hearing on November 19 at Lahore for its SNGPL petition and on November 20 at Karachi for its SSGC request. It has encouraged all stakeholders into this hearing to get documenting their reservations about the tariff increase.